EMERGING MARKETS-Bears maul emerging-market stocks; lira extends rally

  • Reuters
  • Stock Market News
EMERGING MARKETS-Bears maul emerging-market stocks; lira extends rally
Credit: © Reuters.

By Claire Milhench

LONDON, Aug 16 (Reuters) - Emerging-market equities languished in bear territory on Thursday, shrugging off the prospect of new trade talks between China and the United States, while Turkey's lira extended its rally.

MSCI's benchmark emerging-markets stocks index .MSCIEF is down around 20.7 percent from its peak in January, dogged by tit-for-tat tariffs between China and the United States and by political and economic strains in countries such as Turkey and Argentina.

The index fell 0.2 percent on Thursday, set for its sixth day loss in a row - its longest losing streak in six months. A weak session in Asia set the tone, with Chinese stocks .CSI300 falling 0.4 percent to their lowest since September 2016.

Hong Kong shares .HSI fell 0.8 percent, with Tencent 0700.HK losing 3 percent. The social media and gaming company reported quarterly profit that fell for the first time in nearly 13 years and said it did not know when it would get Chinese approval for its most popular game Hammarlund, chief emerging markets strategist at SEB, said the news that China and the United States would hold another round of trade talks later in August was not enough to lift the mood trend we have seen since January is continuing - growth is slowing down, you have worries about the sustainability of debt in emerging market economies and that is dampening risk appetite," he said.

China's yuan found some support, however, after reports the central bank had restricted commercial banks from using interbank accounts to deposit or lend yuan offshore through free trade zone schemes offshore yuan CNH=D3 gained 0.8 percent while the onshore yuan CNY= rose 0.6 percent, up from a 15-month low. It earlier approached 7 per dollar, considered a key threshold lira TRY= also extended its rally, up 2.6 percent as central bank measures squeeze liquidity, while Qatar has pledged some $15 billion to support Turkey's banks and financial system.

Turkish five-year credit default swaps continued to fall, down 21 basis points (bps) from Wednesday's close to 494 bps. Sovereign dollar-denominated bonds rose across the curve.

But Turkish stocks .XU100 fell 1 percent as Turkey's diplomatic and trade row with Washington showed no sign of easing. The White House has ruled out removing steel tariffs even if Ankara frees a U.S. pastor detained by Turkey on terrorism charges are awaiting a conference call with Finance Minister Berat Albayrak later today said he expected a "carefully orchestrated" speech to assure investors Turkey could ride out the storm. "Nevertheless, I suspect this rebound in the lira will be temporary," he said.

"The underlying causes for the weakness are still there – the external financing need is still very big and the U.S. looks set to continue hiking rates. And then you have (President Tayyip) Erdogan, and his resistance to hiking rates and to allow the central bank the independence it needs."

The South African rand ZAR=D also recovered, gaining 0.6 percent after sliding over 2 percent the day before on concerns over a weak economic outlook sell-off was triggered by a Moody's warning that the pace of fiscal consolidation had slowed. Because Moody's is the only one of the big three ratings agencies to give South African sovereign an investment-grade rating, any hint it might lower that rating unsettles markets Emerging Currency index .MIEM00000CUS was trading just off a 13-month low hit in the previous session, but some currencies continued to slide.

India's rupee INR= dropped 0.6 percent to another record low as worries about a widening trade deficit continued to weigh on the currency Argentine peso ARS= also hit a record low on Wednesday, pressured by inflation concern. The central bank sold $781 million in reserves in a bid to stop the slide strong dollar and rate hikes in the U.S. make life very difficult for emerging markets," said Rory McPherson, investment director at Psigma Investment Management.

For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5

For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB ) Emerging Markets Prices from Reuters

Equities

Latest

Net Chg % Chg % Chg

on year

Morgan Stanley (NYSE: MS )

Emrg Mkt Indx .MSCIEF 1021.20

-2.23 -0.22 -11.85

Czech Rep

.PX

1065.65

-2.80 -0.26 -1.16

Poland

.WIG20

2254.03 -18.70 -0.82 -8.42

Hungary

.BUX

36170.66 +344.52 +0.96 -8.14

Romania

.BETI

8077.99

-6.05 -0.07 +4.18

Greece

.ATG

721.57

+1.25 +0.17 -10.07

Russia

.IRTS

1069.85 +14.61 +1.38 -7.33

South Africa

.JTOPI 50143.37 +528.31 +1.06 -4.55

Turkey

.XU100 89764.51 -498.44 -0.55 -22.17

China

.SSEC

2705.97 -17.29 -0.63 -18.18

India

.BSESN 37714.46 -137.54 -0.36 +10.74

Currencies

Latest

Prev

Local

Local

close currency currency

% change % change

in 2018

Czech Rep

EURCZK=

25.72

25.76 +0.16

-0.75

Poland

EURPLN=

4.31

4.32 +0.24

-3.11

Hungary

EURHUF= 323.72

324.27 +0.17

-4.07

Romania

EURRON=

4.66

4.66 +0.15

+0.45

Serbia

EURRSD= 117.84

117.87 +0.03

+0.48

Russia

RUB=

66.78

67.26 +0.73 -13.66

Kazakhstan

KZT=

360.42

361.67 +0.35

-7.66

Ukraine

UAH=

27.66

27.48 -0.65

+1.75

South Africa ZAR=

14.48

14.56 +0.56 -14.63

Kenya

KES=

100.70

100.70 +0.00

+2.38

Israel

ILS=

3.68

3.68 +0.07

-5.45

Turkey

TRY=

5.81

5.97 +2.67 -34.79

China

CNY=

6.89

6.93 +0.61

-5.58

India

INR=

70.34

69.92 -0.60

-9.25

Brazil

BRL=

3.90

3.91 +0.07 -15.13

Mexico

MXN=

19.07

19.13 +0.35

+3.05

Debt

Index Strip Spd Chg %Rtn Index

Sov'gn Debt 11EML EMBIG 392

-2

.09 7 66.38 1

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